Egypt has named its new ambassador to Israel, after withdrawing its previous diplomat four years ago.
Relations improved after the Sharm al-Sheikh summit
It comes days after a new Jordanian ambassador to Israel assumed his post, for the first time since 2000.
Israel's foreign minister has said he hopes Israel can establish diplomatic ties with at least 10 more Arab states.
Israeli Prime Minister Ariel Sharon meanwhile has told an Egyptian newspaper he is ready to make painful concessions for the sake of peace.
'Sign of the times'
Egypt said Mohammed Asim Ibrahim would begin work in take up his post as new ambassador to Israel shortly.
Mr Ibrahim is a former ambassador to Sudan, Ethiopia and Kenya.
The previous Egyptian ambassador was withdrawn shortly after the outbreak of the Palestinian uprising in 2000 in protest at Israel's actions.
Israeli Foreign Ministry spokesman Mark Regev told the BBC News website Israel was "upbeat" over the appointment.
"This is a sign of the times which shows a new atmosphere between Israel and its Arab neighbours," he said.
On Sunday, Jordan's new ambassador, Marouf al-Bakhit, took up his post in Tel Aviv.
His predecessor had not been replaced since August 2000, a month before the intifada (uprising) broke out.
Egypt and Jordan announced the resumption of full diplomatic ties with Israel after the Sharm al-Sheikh summit between Mr Sharon and Palestinian leader Mahmoud Abbas on 8 February.
Israeli Foreign Minister Silvan Shalom said he believed "at least another 10 [Arab countries] can have a diplomatic representation in Israel".
Speaking during a welcoming ceremony for Mr Bakhit, Mr Shalom said: "I hope this will lead to the arrivals of many more ambassadors from the countries of North Africa and the Gulf."
In his first interview with an Arab newspaper since he became Prime Minister in 2001, Mr Sharon told al-Ahram that he had been misrepresented in the Arabic press.
"I have been portrayed as if I want wars and the truth is other than that," he said.
He said Israel could withdraw from a narrow strip on the Gaza-Egypt border known as the Philadelphi corridor if Palestinians stopped smuggling weapons across the border.
In the unprecedented interview, Mr Sharon said Israel's West Bank barrier did not pre-empt a final peace agreement with the Palestinians.
"This wall is not that which will draw [Israel's] borders and its aim is to provide security to citizens of Israel [against Palestinian attacks]."
Asked if the barrier would ever be pulled down, Mr Sharon said Israel will "study the matter".
Egyptian political analyst Diaa Rashwan says the Egyptian government is using the media to prepare the public for more summit meetings with Mr Sharon.
"Egyptians have an image of Sharon as an extremist and a killer of Palestinians. For the Egyptian government, it's time to give another impression of Sharon," Rashwan said in comments quoted by Reuters news agency.